Less than three weeks before the next B.C. election campaign starts, the provincial sales tax will replace the harmonized sales tax. The change comes just in time to lift the biggest political millstone hanging around the neck of the B.C. Liberal government.
But with that switch back to the old tax system, British Columbians will have lost two tax advantages that were part of the HST package. As result, they will pay higher personal income taxes, and low-income earners will lose their quarterly HST rebate cheques.
“It is not the best timing for us politically,” Finance Minister Kevin Falcon said in an interview this week. “But we are going as fast as we can.” Far worse, for his party, is to go into that election with the HST still in place.
Premier Christy Clark briefly had an opportunity to bend the timeline, but gave it away. As a candidate for the B.C. Liberal leadership, she proposed that the legislature simply axe the HST last spring rather than wait for voters to do it in a referendum.
That would have de-harmonized the PST and the federal goods and services tax before Christmas, and would have given her credit with voters who are angry at the slow return to the old tax.
But she abandoned the proposal just a month into her campaign and joined the effort to save the tax. No longer was she outside the cocoon of the B.C. Liberal government, responding to voter anger over the implementation of the tax. She became another champion of one of the most unpopular government policies in B.C. history.
The HST proved again to be financially irresistible to those in government. Moving to the HST brought in $1.6-billion in federal transfers when the province was wrestling with a ballooning deficit. The B.C. Liberals were persuaded, too, that the change would improve the economy during challenging times.
“We were in the middle of the worst financial downturn in a generation,” Mr. Falcon noted this week. “We always believed the HST would achieve increased investment, improve employment and grow the economy.”
That is the story of the B.C. HST from start to finish: The fiscal attraction trumped the political risks. It was the reason Gordon Campbell decided to impose the tax just weeks after an election campaign in which he never breathed a word about it. And it was the motive for his own desperate attempts to save the tax when the public rose up against it. In the end, Ms. Clark followed his path and is still paying the political price.
Her government had another opportunity to change the tenor of the coming election campaign, and it appears the B.C. Liberals have rejected it.
Mr. Falcon this week introduced legislation that will recreate the PST as it was before, even though it will hurt low-income families. The Finance Minister said he had no choice; he was bound to restore the tax, as directed by a majority of voters in last year’s province-wide referendum.
“The NDP will have to defend that, because I will be able to look low-income British Columbians in the eye and say I fought to keep it,” he said. The New Democrats, on the other hand, “knowingly campaigned to go back to a tax and a system that has much less benefits for low-income folks, and I think it will be forever to their shame that they did that.”
NDP Leader Adrian Dix said it’s disingenuous to suggest that the tax was imposed to help the poor. In fact, it was primarily designed to help relieve the province’s deficit and shift taxes from businesses to consumers. For Mr. Falcon to say voters are simply getting what they asked for in the referendum, he said, “is the political equivalent of saying, ‘na-na-na-na-na.’”
Mr. Dix points out that the B.C. Liberals could mitigate the burden on low-income families and have chosen not to do so.
But there is another chance coming up, in the wide-ranging tax review Mr. Falcon has set in motion. Due to report in the fall, the tax review paves the way for changes in the budget he will bring in just before the next election.